NewKerala.com

Key Points

Oil marketing companies saw their LPG losses decrease significantly in the first quarter of FY26. This improvement came after the government implemented a Rs 50 price hike per cylinder in April 2025. Despite the quarterly improvement, cumulative under-recoveries continued to mount, reaching nearly Rs 50,000 crore by June 2025. The Union Cabinet's approval of a Rs 30,000 crore compensation package will provide much-needed relief to these companies.

Key Points: Oil Companies LPG Losses Narrow 35% in Q1FY26 with Government Support

  • LPG under-recoveries narrowed to Rs 7,940 crore from Rs 12,110 crore previous quarter
  • Government approved Rs 30,000 crore compensation package for OMCs
  • April 2025 price hike of Rs 50 per cylinder contributed to improvement
  • Strong petrol and diesel margins partially offset LPG losses
3 min read

LPG losses of oil companies narrows 35% QoQ in Q1FY26: Report

LPG under-recoveries for oil marketing companies reduced by 35% QoQ to Rs 7,940 crore in Q1FY26, aided by price hikes and government compensation packages.

"LPG under-recovery of Oil Marketing Companies for Q1FY26 witnessed a sharp reduction of approx. 35 per cent q-o-q - Care Edge Ratings Report"

New Delhi, August 26

The LPG under-recovery for Oil Marketing Companies (OMCs) witnessed a sharp decline in the first quarter of FY26, narrowing by nearly 35 per cent quarter-on-quarter, according to a report by Care Edge Ratings.

The report highlighted that this reduction came mainly due to the price hike announced in April 2025, where LPG prices were raised by Rs 50 per 14.2 kg cylinder, along with some moderation in sourcing costs.

The report stated "LPG under-recovery of Oil Marketing Companies (OMCs) for the first quarter of FY26 witnessed a sharp reduction of approx. 35 per cent q-o-q".

LPG under-recovery refers to the financial loss that Oil Marketing Companies (OMCs) in India incur when the cost of importing or sourcing Liquefied Petroleum Gas (LPG) is higher than the retail price at which it is sold to consumers.

Despite the improvement, OMCs still faced a significant financial burden. In Q1FY26, LPG under-recoveries stood at approximately Rs 7,940 crore, lower than Rs 12,110 crore recorded in Q4FY25.

The gap, however, continues to persist due to the difference between the cost of sourcing LPG and its revised retail price.

As a result, the cumulative LPG under-recovery of OMCs reached around Rs 49,210 crore by June 30, 2025, compared to Rs 41,270 crore as of March 31, 2025.

This reflects that while the quarterly losses narrowed, the overall under-recovery continued to mount due to sustained mismatches between input costs and retail realizations.

In response to this growing challenge, the Union Cabinet recently approved a large compensation package of Rs 30,000 crore for the OMCs. This amount will be disbursed in twelve instalments to help offset the financial pressure.

Additionally, in April 2025, the Government of India raised the excise duty on fuel sales by Rs 2 per litre, which will now be passed on to OMCs as part of the compensation mechanism for LPG under-recoveries.

The report further noted that while this compensation package will address a substantial part of the past under-recoveries, the pace of fresh accumulation is expected to slow down in the coming quarters, supported by favourable trends in global procurement prices.

It also highlighted that though LPG under-recoveries continue to put stress on OMC profitability, strong marketing margins from petrol and diesel sales have provided some cushion, partially balancing the financial impact.

Overall, the report concluded that a combination of government support through compensation, rangebound crude oil prices, stable domestic retail fuel prices, and potentially lower LPG sourcing costs paints a relatively positive outlook for the OMCs going forward.

This easing of LPG under-recoveries, coupled with policy support, is expected to provide much-needed relief to the companies while ensuring energy supplies remain stable for consumers.

- ANI

Share this article:

Reader Comments

P
Priya S
As a housewife managing kitchen expenses, I felt the ₹50 price hike in April. But if it helps reduce losses and ensures continuous supply, I suppose it's necessary. Hope the benefits reach actual consumers in the long run 🙏
A
Arun Y
The cumulative under-recovery of ₹49,210 crore is alarming! While quarterly improvement is good, the overall picture remains concerning. Government should focus on reducing import dependency through domestic production and alternatives like PNG.
S
Sarah B
Interesting analysis. The compensation mechanism seems well-structured with 12 instalments. Hopefully, the favorable global price trends continue so that both companies and consumers benefit. Energy stability is crucial for economic growth.
Nikhil C
The petrol/diesel margins cushioning LPG losses shows how cross-subsidization works in OMCs. While necessary, we need transparency on how these pricing mechanisms affect different consumer segments. Middle class bears the brunt of these adjustments.
M
Meera T
Hope the government continues to support Ujjwala scheme beneficiaries despite these challenges. LPG is essential for rural women's health and dignity. The ₹30,000 crore package should prioritize maintaining subsidy for poor households.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50